DEFLATION is coming , NOT INFLATION - don't be fooled

Who cares? The only reason you want a correct technical prediction is that so you know where to place your "money" for investments.

Well, "money" as you have learned to think about it has been destroyed, following that "credit" as you have learned to think about it is currently being destroyed. That is, what you will be doing in the future at some point when this system is no more, is barter. Better to learn to haggle.

With Obamacare Taxes + the end of the Bush tax cuts coming - More people will Lose Jobs which will cause DEFLATION

DON'T BE FOOL

THE NUMEROLOGIST

Quoting: Anonymous Coward 26341971

tell me one thing...

how can you tax deflation?

Quoting: Anonymous Coward 28002574

99.9% of these deflationists miss the problem of accumulated loss carry forwards sitting on Corporations balance sheets. These loss carry forwards are in the 100's of millions from past years losses through a business. The financial corporations have gazzilions of these tax levy offsets against future profits setting on thier balance sheets. With "C" corps and LLC's they are on the financial statements and the "S" corps accumulated loss carry forwards are sitting on the CEO's and ownerships K-1 tax forms. These accumulated loss carry forwards are worth over .33 on the dollar and can be purchased for a few pennies. The trade in these accumulated loss carry forwards will assure that big business and the financial institutions never pay taxes again for the next few decades. So all this talk of raising/reducing taxes to sell seats in the gobermant are hogwash and the "real" taxes will fall to the poor and middle class that cannot afford to buy these accumulated loss carry forwards through aquisition to offset their tax levy bills.

Why will the deflationtards will be proven wrong. I will write why this will happen. If any deflationtards disagree with this please dont be a simpleton and just push this aside but respond with some knowledge and thought. Please chime in if you can add to the understanding here. I use the dollar in the description of Credit Default swaps for a basis as they could be denominated in any fiat currency.

Understand that the dollar is the defacto “Reserve currency – Petrodollar” that the world uses to transact business. As that dollar becomes more encumbered with "leverage" its ability to be a store of value has less conviction and faith. The "only" value that a fiat paper currency can retain "is" that conviction and faith.

So, let's look at the reason all faith will be lost in that currency at some point in the future. Since the creation of the FED in 1913 the currency (Dollar) value has been controlled through inflation/deflation. In 1944 the U.S. Dollar through the Brenton Woods agreement was granted “exclusive reserve currency status”.(that status meant that any country wanting to buy oil, food or commodities would have to buy dollars “first” and then they could go into the world market to make their purchase “on” the world market (with those reserve currency notes) also it meant that "If" any country lost faith or trust (through debasement or any other reason) in that currency they could go to "any" central bank in the world and trade that paper currency for physical Gold of equal value.(Good as Gold) In 1971 Nixon suspended Brenton Woods and took us off the Gold Standard telling other nations that they could not "now" exchange the dollar for Gold as previously promised.

Here is the key to it's downfall:

The U.S. dollar (debt) from 1971 through around 1995 was able to be removed from a balance sheet with little implication through accounting techniques claiming (debt) as a loss and could be written off and that was the end of it.

Here (around 1995) comes Blythe Masters from JP morgan and she creates what is called a "Credit Default Swap" This is essentially an insurance policy on a default to pay back a debt or loan. So, let’s say for shins and giggles Greece is lent 1 trillion dollars by another country. They promise to pay that money back at a set interest rate over time. The CDS (Credit Default Swap) enables financial institutions to purchase a put (Default insurance or a bet against the underlying asset (loaned debt or CDO – Collateralized Debt Obligations) never being paid back. This would be OK if only "ONE PUT" was taken out against the chance of that debt not being paid back. The problem "of the whole planet situation right now" is that this debt can be leveraged by 100 "PUTS" or in layman’s terms (for each dollar that was lent to Greece there are $100 betting against "each" one of the dollars lent, that it will default and not be paid back) So, now you have 100 Trillion dollars leveraged against the default of a 1 Trillion dollar loan. So, now Greece cannot pay back the loan (CDO-debt) triggering the CDS from the default on the CDO and now everyone that bought a "PUT" wants’ to get paid on their bet. The next problem is that those financial institutions that sold those "PUTS" are only required to have a 6% reserve (Money held in escrow to pay claims) So, in reality those institutions only have .06 cents per dollar to pay those claims and not the “whole” dollar "required or needed" to pay those claims.

This is why all of these bailouts are created so "NO ONE" is allowed to fail "Triggering" these Credit Default Swaps. The original debt is maintained through interest payments from "newly created" debt (bailouts) because the money to pay those claims does not even exist.........Yet. So, you say why can’t they just unwind them.Answer, is that you can't because everyone that purchased these "PUTS" on “CDO’s” wants’ to get paid because they are classified as an asset on "their" balance sheets.

When the discussion turns to CDS/CDO's at parties, I ask if anyone can explain them so that we can have an educated discussion. No one can, so I give this analogy and everyone sees a little better what the problem is. I know it's not a perfect description but conveys the basis.Previously posted on ZH;So, GK wants to buy a house, so GK goes to Joe banker and says hey Joe can you lend me a 100K to buy this house. Joe says sure GK here is your 100K you can pay me back over time with interest.Then Joe gets back from the closing and says to himself, Hey "what if GK doesn't pay me back, I will be out a 100K. So, Joe calls Allstate and talks to Al the broker and says, "Hey Al I want to buy a 100K insurance policy incase GK doesn't pay me back. Al says sure Joe here is your 100K default insurance policy (CDS). Then after Al gets off the phone with Joe, Al says to himself "wait a minute" "what if Joe doesn't pay me back" and Al quickly calls jerry at AIG and says hey jerry I need an insurance policy for 100K incase Joe doesn't pay me back. Jerry says sure Al here is you CDS for 100K incase Joe the banker doesn't pay you. Then Jerry gets off the phone with Al and says "wait a minute" "What if Al doesn't pay me back and then he quickly calls Zurich and talks to Chad and says "hey Chad" "I need to purchase a 100K policy against Al not paying incase GK defaults on his mortgage. Chad says here you go Jerry a 100K CDS for you and the Chad says to himself......................................................​.........you see were this is going.So, let’s say this goes 20 CDS contracts deep. So what we have is 2,000,000 dollars worth of credit default swaps written on a (CDO) 100K depreciating asset that is now only worth 60K. Now the leverage went from 20 to 33 because of the deflation in the housing prices. (That’s why there is no mark-to-market)Now GK's employer just called and is laying GK off "permanently". The problem is now that the financial institutions that wrote all these CDS's (a ton of American banks) were only required to have a 6% reserve on this 100K worth of exposure (each). So, you see the money does not even exist-yet (our anti deflationary kryptonite backstop and tribute to JS for the saying "QE to infinity") to pay these claims and all these entities must be bailed out to stop the contagion before wiping out everybody.

I used a house as an example and it actually is a physical asset. Most of the CDO's are written against debt (paper, but classified as an asset on balance sheets with "no" underlying physical nothing) Here is where the problems lay. The “DEAL” that they are trying to close is a perfect "orderly" transaction with a 70% haircut (what is perfect and orderly in a panic once these start triggering). It's the reserve of 6% that is the problem. Let’s take our old friend JPM that has a leveraged balance sheet of 44 to 1. If they are in the wrong chain position on the CDS loop and let's say that they have to pay out 5x of that leverage but only receive 2x of the leverage back. ???????????????????

Where does the money come from to pay that net 3x's exposure? (it does not exist...yet, remember the 44 to 1 leverage) hence the bailouts to keep this thing from going full balls out.

There it is, and it's called "Contagion"

So any deflation will trip the balance sheets into default causing the printing of currencies to try and save the system. (Remember that money does not even exist "yet" to honor or pay the CDS insurance claims as it must be printed into existance)This can be proven by the labeling of the 70% haircut on Greece’s debt not being classified as a default, hence delaying the massive printing of money to honor them.

Hyper-Inflation

Quoting: Anonymous Coward 27807407

Nice job explaining inflation and the ponzi scheme

But don't try this derivatives scam with your fiat paper currency on your home folks, you will promptly be arrested, shackled and seen on CNBC's 'American Greed' with the likes of Bernie Madoff.

Why will the deflationtards will be proven wrong. I will write why this will happen. If any deflationtards disagree with this please dont be a simpleton and just push this aside but respond with some knowledge and thought. Please chime in if you can add to the understanding here. I use the dollar in the description of Credit Default swaps for a basis as they could be denominated in any fiat currency.

Understand that the dollar is the defacto “Reserve currency – Petrodollar” that the world uses to transact business. As that dollar becomes more encumbered with "leverage" its ability to be a store of value has less conviction and faith. The "only" value that a fiat paper currency can retain "is" that conviction and faith.

So, let's look at the reason all faith will be lost in that currency at some point in the future. Since the creation of the FED in 1913 the currency (Dollar) value has been controlled through inflation/deflation. In 1944 the U.S. Dollar through the Brenton Woods agreement was granted “exclusive reserve currency status”.(that status meant that any country wanting to buy oil, food or commodities would have to buy dollars “first” and then they could go into the world market to make their purchase “on” the world market (with those reserve currency notes) also it meant that "If" any country lost faith or trust (through debasement or any other reason) in that currency they could go to "any" central bank in the world and trade that paper currency for physical Gold of equal value.(Good as Gold) In 1971 Nixon suspended Brenton Woods and took us off the Gold Standard telling other nations that they could not "now" exchange the dollar for Gold as previously promised.

Here is the key to it's downfall:

The U.S. dollar (debt) from 1971 through around 1995 was able to be removed from a balance sheet with little implication through accounting techniques claiming (debt) as a loss and could be written off and that was the end of it.

Here (around 1995) comes Blythe Masters from JP morgan and she creates what is called a "Credit Default Swap" This is essentially an insurance policy on a default to pay back a debt or loan. So, let’s say for shins and giggles Greece is lent 1 trillion dollars by another country. They promise to pay that money back at a set interest rate over time. The CDS (Credit Default Swap) enables financial institutions to purchase a put (Default insurance or a bet against the underlying asset (loaned debt or CDO – Collateralized Debt Obligations) never being paid back. This would be OK if only "ONE PUT" was taken out against the chance of that debt not being paid back. The problem "of the whole planet situation right now" is that this debt can be leveraged by 100 "PUTS" or in layman’s terms (for each dollar that was lent to Greece there are $100 betting against "each" one of the dollars lent, that it will default and not be paid back) So, now you have 100 Trillion dollars leveraged against the default of a 1 Trillion dollar loan. So, now Greece cannot pay back the loan (CDO-debt) triggering the CDS from the default on the CDO and now everyone that bought a "PUT" wants’ to get paid on their bet. The next problem is that those financial institutions that sold those "PUTS" are only required to have a 6% reserve (Money held in escrow to pay claims) So, in reality those institutions only have .06 cents per dollar to pay those claims and not the “whole” dollar "required or needed" to pay those claims.

This is why all of these bailouts are created so "NO ONE" is allowed to fail "Triggering" these Credit Default Swaps. The original debt is maintained through interest payments from "newly created" debt (bailouts) because the money to pay those claims does not even exist.........Yet. So, you say why can’t they just unwind them.Answer, is that you can't because everyone that purchased these "PUTS" on “CDO’s” wants’ to get paid because they are classified as an asset on "their" balance sheets.

When the discussion turns to CDS/CDO's at parties, I ask if anyone can explain them so that we can have an educated discussion. No one can, so I give this analogy and everyone sees a little better what the problem is. I know it's not a perfect description but conveys the basis.Previously posted on ZH;So, GK wants to buy a house, so GK goes to Joe banker and says hey Joe can you lend me a 100K to buy this house. Joe says sure GK here is your 100K you can pay me back over time with interest.Then Joe gets back from the closing and says to himself, Hey "what if GK doesn't pay me back, I will be out a 100K. So, Joe calls Allstate and talks to Al the broker and says, "Hey Al I want to buy a 100K insurance policy incase GK doesn't pay me back. Al says sure Joe here is your 100K default insurance policy (CDS). Then after Al gets off the phone with Joe, Al says to himself "wait a minute" "what if Joe doesn't pay me back" and Al quickly calls jerry at AIG and says hey jerry I need an insurance policy for 100K incase Joe doesn't pay me back. Jerry says sure Al here is you CDS for 100K incase Joe the banker doesn't pay you. Then Jerry gets off the phone with Al and says "wait a minute" "What if Al doesn't pay me back and then he quickly calls Zurich and talks to Chad and says "hey Chad" "I need to purchase a 100K policy against Al not paying incase GK defaults on his mortgage. Chad says here you go Jerry a 100K CDS for you and the Chad says to himself......................................................​.........you see were this is going.So, let’s say this goes 20 CDS contracts deep. So what we have is 2,000,000 dollars worth of credit default swaps written on a (CDO) 100K depreciating asset that is now only worth 60K. Now the leverage went from 20 to 33 because of the deflation in the housing prices. (That’s why there is no mark-to-market)Now GK's employer just called and is laying GK off "permanently". The problem is now that the financial institutions that wrote all these CDS's (a ton of American banks) were only required to have a 6% reserve on this 100K worth of exposure (each). So, you see the money does not even exist-yet (our anti deflationary kryptonite backstop and tribute to JS for the saying "QE to infinity") to pay these claims and all these entities must be bailed out to stop the contagion before wiping out everybody.

I used a house as an example and it actually is a physical asset. Most of the CDO's are written against debt (paper, but classified as an asset on balance sheets with "no" underlying physical nothing) Here is where the problems lay. The “DEAL” that they are trying to close is a perfect "orderly" transaction with a 70% haircut (what is perfect and orderly in a panic once these start triggering). It's the reserve of 6% that is the problem. Let’s take our old friend JPM that has a leveraged balance sheet of 44 to 1. If they are in the wrong chain position on the CDS loop and let's say that they have to pay out 5x of that leverage but only receive 2x of the leverage back. ???????????????????

Where does the money come from to pay that net 3x's exposure? (it does not exist...yet, remember the 44 to 1 leverage) hence the bailouts to keep this thing from going full balls out.

There it is, and it's called "Contagion"

So any deflation will trip the balance sheets into default causing the printing of currencies to try and save the system. (Remember that money does not even exist "yet" to honor or pay the CDS insurance claims as it must be printed into existance)This can be proven by the labeling of the 70% haircut on Greece’s debt not being classified as a default, hence delaying the massive printing of money to honor them.

Hyper-Inflation

Quoting: Anonymous Coward 27807407

anyone who bought CDSs needs to take a bath and the people who invented and market them need to go to jail

Why will the deflationtards will be proven wrong. I will write why this will happen. If any deflationtards disagree with this please dont be a simpleton and just push this aside but respond with some knowledge and thought. Please chime in if you can add to the understanding here. I use the dollar in the description of Credit Default swaps for a basis as they could be denominated in any fiat currency.

Understand that the dollar is the defacto “Reserve currency – Petrodollar” that the world uses to transact business. As that dollar becomes more encumbered with "leverage" its ability to be a store of value has less conviction and faith. The "only" value that a fiat paper currency can retain "is" that conviction and faith.

So, let's look at the reason all faith will be lost in that currency at some point in the future. Since the creation of the FED in 1913 the currency (Dollar) value has been controlled through inflation/deflation. In 1944 the U.S. Dollar through the Brenton Woods agreement was granted “exclusive reserve currency status”.(that status meant that any country wanting to buy oil, food or commodities would have to buy dollars “first” and then they could go into the world market to make their purchase “on” the world market (with those reserve currency notes) also it meant that "If" any country lost faith or trust (through debasement or any other reason) in that currency they could go to "any" central bank in the world and trade that paper currency for physical Gold of equal value.(Good as Gold) In 1971 Nixon suspended Brenton Woods and took us off the Gold Standard telling other nations that they could not "now" exchange the dollar for Gold as previously promised.

Here is the key to it's downfall:

The U.S. dollar (debt) from 1971 through around 1995 was able to be removed from a balance sheet with little implication through accounting techniques claiming (debt) as a loss and could be written off and that was the end of it.

Here (around 1995) comes Blythe Masters from JP morgan and she creates what is called a "Credit Default Swap" This is essentially an insurance policy on a default to pay back a debt or loan. So, let’s say for shins and giggles Greece is lent 1 trillion dollars by another country. They promise to pay that money back at a set interest rate over time. The CDS (Credit Default Swap) enables financial institutions to purchase a put (Default insurance or a bet against the underlying asset (loaned debt or CDO – Collateralized Debt Obligations) never being paid back. This would be OK if only "ONE PUT" was taken out against the chance of that debt not being paid back. The problem "of the whole planet situation right now" is that this debt can be leveraged by 100 "PUTS" or in layman’s terms (for each dollar that was lent to Greece there are $100 betting against "each" one of the dollars lent, that it will default and not be paid back) So, now you have 100 Trillion dollars leveraged against the default of a 1 Trillion dollar loan. So, now Greece cannot pay back the loan (CDO-debt) triggering the CDS from the default on the CDO and now everyone that bought a "PUT" wants’ to get paid on their bet. The next problem is that those financial institutions that sold those "PUTS" are only required to have a 6% reserve (Money held in escrow to pay claims) So, in reality those institutions only have .06 cents per dollar to pay those claims and not the “whole” dollar "required or needed" to pay those claims.

This is why all of these bailouts are created so "NO ONE" is allowed to fail "Triggering" these Credit Default Swaps. The original debt is maintained through interest payments from "newly created" debt (bailouts) because the money to pay those claims does not even exist.........Yet. So, you say why can’t they just unwind them.Answer, is that you can't because everyone that purchased these "PUTS" on “CDO’s” wants’ to get paid because they are classified as an asset on "their" balance sheets.

When the discussion turns to CDS/CDO's at parties, I ask if anyone can explain them so that we can have an educated discussion. No one can, so I give this analogy and everyone sees a little better what the problem is. I know it's not a perfect description but conveys the basis.Previously posted on ZH;So, GK wants to buy a house, so GK goes to Joe banker and says hey Joe can you lend me a 100K to buy this house. Joe says sure GK here is your 100K you can pay me back over time with interest.Then Joe gets back from the closing and says to himself, Hey "what if GK doesn't pay me back, I will be out a 100K. So, Joe calls Allstate and talks to Al the broker and says, "Hey Al I want to buy a 100K insurance policy incase GK doesn't pay me back. Al says sure Joe here is your 100K default insurance policy (CDS). Then after Al gets off the phone with Joe, Al says to himself "wait a minute" "what if Joe doesn't pay me back" and Al quickly calls jerry at AIG and says hey jerry I need an insurance policy for 100K incase Joe doesn't pay me back. Jerry says sure Al here is you CDS for 100K incase Joe the banker doesn't pay you. Then Jerry gets off the phone with Al and says "wait a minute" "What if Al doesn't pay me back and then he quickly calls Zurich and talks to Chad and says "hey Chad" "I need to purchase a 100K policy against Al not paying incase GK defaults on his mortgage. Chad says here you go Jerry a 100K CDS for you and the Chad says to himself......................................................​.........you see were this is going.So, let’s say this goes 20 CDS contracts deep. So what we have is 2,000,000 dollars worth of credit default swaps written on a (CDO) 100K depreciating asset that is now only worth 60K. Now the leverage went from 20 to 33 because of the deflation in the housing prices. (That’s why there is no mark-to-market)Now GK's employer just called and is laying GK off "permanently". The problem is now that the financial institutions that wrote all these CDS's (a ton of American banks) were only required to have a 6% reserve on this 100K worth of exposure (each). So, you see the money does not even exist-yet (our anti deflationary kryptonite backstop and tribute to JS for the saying "QE to infinity") to pay these claims and all these entities must be bailed out to stop the contagion before wiping out everybody.

I used a house as an example and it actually is a physical asset. Most of the CDO's are written against debt (paper, but classified as an asset on balance sheets with "no" underlying physical nothing) Here is where the problems lay. The “DEAL” that they are trying to close is a perfect "orderly" transaction with a 70% haircut (what is perfect and orderly in a panic once these start triggering). It's the reserve of 6% that is the problem. Let’s take our old friend JPM that has a leveraged balance sheet of 44 to 1. If they are in the wrong chain position on the CDS loop and let's say that they have to pay out 5x of that leverage but only receive 2x of the leverage back. ???????????????????

Where does the money come from to pay that net 3x's exposure? (it does not exist...yet, remember the 44 to 1 leverage) hence the bailouts to keep this thing from going full balls out.

There it is, and it's called "Contagion"

So any deflation will trip the balance sheets into default causing the printing of currencies to try and save the system. (Remember that money does not even exist "yet" to honor or pay the CDS insurance claims as it must be printed into existance)This can be proven by the labeling of the 70% haircut on Greece’s debt not being classified as a default, hence delaying the massive printing of money to honor them.

Hyper-Inflation

Quoting: Anonymous Coward 27807407

Nice job explaining inflation and the ponzi scheme

But don't try this derivatives scam with your fiat paper currency on your home folks, you will promptly be arrested, shackled and seen on CNBC's 'American Greed' with the likes of Bernie Madoff.

Quoting: goldielucks

Everything described in the Revelation can be explained as being caused by what that used defined right there.

With Obamacare Taxes + the end of the Bush tax cuts coming - More people will Lose Jobs which will cause DEFLATION

DON'T BE FOOL

THE NUMEROLOGIST

Quoting: Anonymous Coward 26341971

tell me one thing...

how can you tax deflation?

Quoting: Anonymous Coward 28002574

99.9% of these deflationists miss the problem of accumulated loss carry forwards sitting on Corporations balance sheets. These loss carry forwards are in the 100's of millions from past years losses through a business. The financial corporations have gazzilions of these tax levy offsets against future profits setting on thier balance sheets. With "C" corps and LLC's they are on the financial statements and the "S" corps accumulated loss carry forwards are sitting on the CEO's and ownerships K-1 tax forms. These accumulated loss carry forwards are worth over .33 on the dollar and can be purchased for a few pennies. The trade in these accumulated loss carry forwards will assure that big business and the financial institutions never pay taxes again for the next few decades. So all this talk of raising/reducing taxes to sell seats in the gobermant are hogwash and the "real" taxes will fall to the poor and middle class that cannot afford to buy these accumulated loss carry forwards through aquisition to offset their tax levy bills.

Quoting: Anonymous Coward 27807407

correct.

largest wealth transfer in modern history happening right now from the middle classes to the upper classes, then there will be 2 classes of people in the US/UK and most of Europe, the rich and the poor, with nothing in the middle.....

I have a feeling energy will be in inflation as well as food and cheaper consumer goods.

Big expensive items, cars, houses, computers will be in deflation.

This would make those with money more wealthy and those without even poorer.

Quoting: Anonymous Coward 27938419

Agree until it is their turn to sit out of the game. As this continues the more people that lose their jobs makes the ones still working perfect targets if your not producing 1000% a day. I can see some companies going under because they can't find enough people to do the dirty work. They throw their hands up and say it isn't worth it anymore. I could be wrong we will see.

agreed......always deflation in the absolute end....then a new currency system.....

currently in the end of the biflation phase imo.....big inflation in essentials and deflation in Information Technology and shit you don't need to live etc.....

then comes massive inflation, then a hyperinflation, then a currency reset/change/new system (metals backed probably, hence the soros/buffet have been buying PHYS on the quiet, whilst slagging of metals and pretending to buy bonds/guilts etc)

Hyperinflation is not the printing of massive amounts of paper script called money as it "is" the actual "loss of faith" in a/that currency that creates hyperinflation.

As in:Your neighbor will try to get rid of his dollars before you get rid of yours. This escalates the prices of everything through the roof because the currency becomes a "hot potato" and no one wants it, as everyone tries to get rid of it in exchange for any bit of value that can be extracted/exchanged from it before it becomes worthless.

That's hyperinflationThere will be no deflation in that currency because they will change it to something else before any deflation in it, because people by then know its worthless and have no faith in it.

Name one countries currency that went into deflation after hyperinflation ? You won’t find one !

The banks will buy the real value in hard assets like Gold or metals with the paper script "they" printed "while you had faith" "in it" long before you do. They will also sell you the paper script that represents the underlying asset that they are trying to accumulate by selling you ETF's like GLD that you "cannot" exchange for real gold. (only guys like Scoros) can

Look up the BIS (Bank/of/International/Settlements) and reclassification of Gold from a tier 3 (50% weighting) to a tier 1 (100% weighting) class asset on their balance sheets that should occur in early 2013 coinciding with the release of a new "basket of assets" world reserve currency that includes a 50% weighting of Gold.(worldwide)

Why will the deflationtards will be proven wrong. I will write why this will happen. If any deflationtards disagree with this please dont be a simpleton and just push this aside but respond with some knowledge and thought. Please chime in if you can add to the understanding here. I use the dollar in the description of Credit Default swaps for a basis as they could be denominated in any fiat currency.

Understand that the dollar is the defacto “Reserve currency – Petrodollar” that the world uses to transact business. As that dollar becomes more encumbered with "leverage" its ability to be a store of value has less conviction and faith. The "only" value that a fiat paper currency can retain "is" that conviction and faith.

So, let's look at the reason all faith will be lost in that currency at some point in the future. Since the creation of the FED in 1913 the currency (Dollar) value has been controlled through inflation/deflation. In 1944 the U.S. Dollar through the Brenton Woods agreement was granted “exclusive reserve currency status”.(that status meant that any country wanting to buy oil, food or commodities would have to buy dollars “first” and then they could go into the world market to make their purchase “on” the world market (with those reserve currency notes) also it meant that "If" any country lost faith or trust (through debasement or any other reason) in that currency they could go to "any" central bank in the world and trade that paper currency for physical Gold of equal value.(Good as Gold) In 1971 Nixon suspended Brenton Woods and took us off the Gold Standard telling other nations that they could not "now" exchange the dollar for Gold as previously promised.

Here is the key to it's downfall:

The U.S. dollar (debt) from 1971 through around 1995 was able to be removed from a balance sheet with little implication through accounting techniques claiming (debt) as a loss and could be written off and that was the end of it.

Here (around 1995) comes Blythe Masters from JP morgan and she creates what is called a "Credit Default Swap" This is essentially an insurance policy on a default to pay back a debt or loan. So, let’s say for shins and giggles Greece is lent 1 trillion dollars by another country. They promise to pay that money back at a set interest rate over time. The CDS (Credit Default Swap) enables financial institutions to purchase a put (Default insurance or a bet against the underlying asset (loaned debt or CDO – Collateralized Debt Obligations) never being paid back. This would be OK if only "ONE PUT" was taken out against the chance of that debt not being paid back. The problem "of the whole planet situation right now" is that this debt can be leveraged by 100 "PUTS" or in layman’s terms (for each dollar that was lent to Greece there are $100 betting against "each" one of the dollars lent, that it will default and not be paid back) So, now you have 100 Trillion dollars leveraged against the default of a 1 Trillion dollar loan. So, now Greece cannot pay back the loan (CDO-debt) triggering the CDS from the default on the CDO and now everyone that bought a "PUT" wants’ to get paid on their bet. The next problem is that those financial institutions that sold those "PUTS" are only required to have a 6% reserve (Money held in escrow to pay claims) So, in reality those institutions only have .06 cents per dollar to pay those claims and not the “whole” dollar "required or needed" to pay those claims.

This is why all of these bailouts are created so "NO ONE" is allowed to fail "Triggering" these Credit Default Swaps. The original debt is maintained through interest payments from "newly created" debt (bailouts) because the money to pay those claims does not even exist.........Yet. So, you say why can’t they just unwind them.Answer, is that you can't because everyone that purchased these "PUTS" on “CDO’s” wants’ to get paid because they are classified as an asset on "their" balance sheets.

When the discussion turns to CDS/CDO's at parties, I ask if anyone can explain them so that we can have an educated discussion. No one can, so I give this analogy and everyone sees a little better what the problem is. I know it's not a perfect description but conveys the basis.Previously posted on ZH;So, GK wants to buy a house, so GK goes to Joe banker and says hey Joe can you lend me a 100K to buy this house. Joe says sure GK here is your 100K you can pay me back over time with interest.Then Joe gets back from the closing and says to himself, Hey "what if GK doesn't pay me back, I will be out a 100K. So, Joe calls Allstate and talks to Al the broker and says, "Hey Al I want to buy a 100K insurance policy incase GK doesn't pay me back. Al says sure Joe here is your 100K default insurance policy (CDS). Then after Al gets off the phone with Joe, Al says to himself "wait a minute" "what if Joe doesn't pay me back" and Al quickly calls jerry at AIG and says hey jerry I need an insurance policy for 100K incase Joe doesn't pay me back. Jerry says sure Al here is you CDS for 100K incase Joe the banker doesn't pay you. Then Jerry gets off the phone with Al and says "wait a minute" "What if Al doesn't pay me back and then he quickly calls Zurich and talks to Chad and says "hey Chad" "I need to purchase a 100K policy against Al not paying incase GK defaults on his mortgage. Chad says here you go Jerry a 100K CDS for you and the Chad says to himself......................................................​.........you see were this is going.So, let’s say this goes 20 CDS contracts deep. So what we have is 2,000,000 dollars worth of credit default swaps written on a (CDO) 100K depreciating asset that is now only worth 60K. Now the leverage went from 20 to 33 because of the deflation in the housing prices. (That’s why there is no mark-to-market)Now GK's employer just called and is laying GK off "permanently". The problem is now that the financial institutions that wrote all these CDS's (a ton of American banks) were only required to have a 6% reserve on this 100K worth of exposure (each). So, you see the money does not even exist-yet (our anti deflationary kryptonite backstop and tribute to JS for the saying "QE to infinity") to pay these claims and all these entities must be bailed out to stop the contagion before wiping out everybody.

I used a house as an example and it actually is a physical asset. Most of the CDO's are written against debt (paper, but classified as an asset on balance sheets with "no" underlying physical nothing) Here is where the problems lay. The “DEAL” that they are trying to close is a perfect "orderly" transaction with a 70% haircut (what is perfect and orderly in a panic once these start triggering). It's the reserve of 6% that is the problem. Let’s take our old friend JPM that has a leveraged balance sheet of 44 to 1. If they are in the wrong chain position on the CDS loop and let's say that they have to pay out 5x of that leverage but only receive 2x of the leverage back. ???????????????????

Where does the money come from to pay that net 3x's exposure? (it does not exist...yet, remember the 44 to 1 leverage) hence the bailouts to keep this thing from going full balls out.

There it is, and it's called "Contagion"

So any deflation will trip the balance sheets into default causing the printing of currencies to try and save the system. (Remember that money does not even exist "yet" to honor or pay the CDS insurance claims as it must be printed into existance)This can be proven by the labeling of the 70% haircut on Greece’s debt not being classified as a default, hence delaying the massive printing of money to honor them.

Hyper-Inflation

Quoting: Anonymous Coward 27807407

anyone who bought CDSs needs to take a bath and the people who invented and market them need to go to jail

Quoting: Anonymous Coward 11348546

Its the financial institutions themselves (banks) it's called leveraging the balance sheets for more and more profit ! JPM/ has a 44 to 1 leveraged balance sheet and this could be considered low by todays standards

agreed......always deflation in the absolute end....then a new currency system.....

currently in the end of the biflation phase imo.....big inflation in essentials and deflation in Information Technology and shit you don't need to live etc.....

then comes massive inflation, then a hyperinflation, then a currency reset/change/new system (metals backed probably, hence the soros/buffet have been buying PHYS on the quiet, whilst slagging of metals and pretending to buy bonds/guilts etc)